www.iscea.hk

Lean Management

Principle & Practice

Mike Sheahan

18 July 2008

Hong Kong Society for Quality

Speaker’s Introduction

Mike Sheahan, CLM, CFPIM, CIRM, MBA

is an ISCEA CLM and APICS Certified Instructor who has helped many organizations with ERP assessments and implementations, educational programs, and lean initiatives.

He is a former International President of APICS and is a frequent conference presenter in the world.

The World Class Imperative

Supply Chain

Capabilities

Market Leadership

ProfitAdvantage

75% Higher Profits*

*Supply Chain Management Review, Survey of 110 companies in five sectors

Business Strategy

Total Supply Chain Management Cost

5.87.1 6.7 7.0

6.1 6.5

12.213.1

11.310.3

10.9 11.5

0.0

5.0

10.0

15.0

Computers Industrial Telecom Chemicals PackagedGoods

Overall

% R

evenue

Best

Avg

The Lean JourneyLean

Supply Chain5 Principles of Lean

CurrentPosition

Specify Value

Identify Value

Streams

Create Flow

Leverage Pull

Seek Perfection

1. Specify Value

Value Definition

Waste Elimination

A Difference?

NVA

VA

BVA

VA, BVA, or NVA?

Value Added

Business Value Added

Non-Value Added

Cost Reduction - Two Approaches

VA NVA

VA NVA

VA NVA

BVA

BVA

BVA

Total Cost

Operational timeShear 10 blanks = 15 minsPunch 10 blanks = 30 minsDe-burr 100 parts = 10 minsForm 100 parts = 40 minsHardware 100 parts = 15 minsPack 100 parts = 10 minsTotal = 120 mins

Lead time1.0 day1.0 day0.5 day1.0 day1.5 day0.5 day5.5 days (7,920 mins)

120 operation minutes is 1.5% of the total lead time of 7,920 minutes a ratio of 1 to 66!

Value Added Ratios

What Drives Large Ratios?Batch lot sizing

Push systems

Long setup times

Incapable

equipment

Unreliable

processes

Departmental

layout

What to do?

7 types of waste

Poor processing

Motion

Waiting

Defects

Over Production

Movement

Inventory

7 types of waste

Total Landed Cost

The sum of all costs associated with making and delivering products and services to the point where they produce revenue – your customer's door.

Total Landed Cost includes…

Unit price + average fully loaded transportation costs + average handling costs + duties, tariffs, and taxes + documentation and broker fees + financial transaction costs + inventory carrying costs + inventory obsolescence costs + rework and damage costs + expediting costs + customer service penalties.

2. Identify Value Streams

Value Stream DefinitionMapping Streams7 Steps to Success

Value Stream Definition

All activities –

value added, non-value added and business value added –

required to bring:

1. A product from materials to the point of use by the customer

2. A service from supplies to solving the need of a customer

3. An idea from concept to implementation

Identifying Value Streams

Supplier

Supplier

Supplier

Supplier

Customer

Customer

Customer

Customer

Mapping Streams

Information

Materials & Services

Funds

Three Common Value Streams

Materials to Finished Goods

Customer Order to Delivery

Concept to Product Launch

Other Value Streams

Prospect to Order

Concept to Improvement

Need to Service

Feeder Streams

Order Processing

Supplier Selection

Month End Processing

1. Select the value stream

2. Document the current state

3. Map the current state ‘as is’4. Identify and prioritize changes

5. Craft the future state ‘to be’6. Time phased implementation

7. Continuous process improvement

Seven Steps To Success

3. Create Flow

5S SystemKaizen Teams

Changeover ReductionCross TrainingVisual Controls

1. Sort

2. Stabilize

3. Shine4. Standardize

5. Sustain

Kaizen Blitz

Keep an open mind

Maintain a positive attitude

Never leave in silent disagreement

Create a safe environment

Practice mutual respect

Treat others as you’d like to be treated

One person, one voice – no position or rank

There is no such thing as a dumb question

Understand the process

Just do it!

Kaizen Teams

Definition of changeover time

The time required for a specific machine, resource, work center, process, or line to convert from the production of the last good piece of item A to the first good piece of item B.

APICS Dictionary, 11th edition

The S.M.E.D. Approach

1. Observe (videotape) a changeover2. Define internal and external elements3. Separate external elements from

period when equipment is not running4. Shift as many internal elements to

external as possible5. Streamline the internal elements6. Streamline the external elements

Cross TrainingName Skill

1Skill 2

Skill 3

Skill 4

Skill 5

Skill 6

Skill 7

Pete

Jose

Mary

Jane

Bill

Tom

Juan

Visual Controls

Self-explaining

Self-regulating

Self-controlling

Throughput

Quality Cross Training Matrix

Employee Suggestions

Other Projects

Visual Controls

5S Action Plan

Kanban Action PlanOn-time

4. Leverage Pull

KanbanCollaboration

Customer Configuration

S u p p l i e r

AAAAA

Move card attached to

each bin

Production card

attached to each bin

Inbound stocking

Outbound stocking

AAAAA

AAAAA

AAAAA

AAAAA

Work Center

1

Work center

2

1 2 31 2 3

Copyright Robert Abair Associates, Inc., 2003, 2004

Kanban

Production card

attached to each bin

Move card attached to

each bin

Outbound stocking

Inbound stocking

Simulations

Simulations are…Participative in nature and generally last 1-8 hours

Designed to teach the basics of lean enterprises and change management

A means for participants to try the concepts and tools in a non-threatening environment

Excellent for awakening participants to the possibilities for improvement

Open forums for the exchange of ideas and issues

For everyone within an organization, from the Janitor to the CEO

Simulations aren’t…

≠

Forums for dictating or imposing one’s own thoughts on others

≠

Intended to make experts out of participants

≠

To take the place of thorough in-depth training

≠

Capable of exactly matching your own process

≠

Capable of simulating every possibility nor should they

≠

Just for senior staff members or production staff

Collaboration

visibility into true customer demand

P

P

P

Collaboration Techniques

Quick Response

Continuous Replenishment

Vendor Managed Inventory

Collaborative Planning Forecasting

& Replenishment

Customer Configuration

Mass Customization

Postponement

Quick Response

Mass Customization

Adjustable Dimensional

Modular

Postponement

Delay the final configuration until the last possible moment

Restructure/change location of final assembly

Reconfigure the product to leverage common platforms & components

Apply self-service concepts

Quick Response aka

High Flexibility Scheduling

Ability to deliver product to the customer before they can change their mind

Ability to respond quickly to changes in product volume or mix

Benefits of Pull Production

Manufacturing cycle time reduced from 3-4 weeks to 3 daysNo MOs required for active products (400 MOs eliminated)Visual inventory managementFlexible manufacturing – lot size of one.Customer “pulls” trigger production.

5. Seek Perfection

Continuous ImprovementChange Management

Education PlanningLean Tool Kit

Continuous Process Improvement Business Process Reengineering

Improvement Incremental Step-by-Step Quantum Jump

Process map “As-is”

vs. “To-be” “As-is”

vs. “Could be”

Duration Long term on-going effort Short term high intensity effort

Estimated success rate 60 –

70% 30 - 40%

Key concepts Root cause analysis Radical clean sheet approach

Key question How can we improve what we do? Why do we do what we do?

Time

Perf

orm

anc e BPR

Time

Perf

orm

anc e CPI

CPI vs. BPR

The 20/60/20 Rule

1. 20% will buy-in soon after you demonstrate a commitment to lean.

2. 60% will take a wait and see approach looking to the informal leaders.

3. 20% will never get on board and may even sabotage efforts.

Change introduced

Shock

Denial

Anger

Blame

Accept

Problem solve

Decision making

Action

Implementation

The Change Curve

Education Planning

1. Awareness 2. Problem Solving Tools

3. Soft Skills 4. Advanced

Value Steam Mapping

5S System KaizenTeams

TaktTime

MassCustomization

Collaboration

CellularValue CreationKanban

Strategic Alignment

Visual Controls

ChangeoverReduction

CrossTraining

The Lean Toolkit

Who is Responsible?

Certified Lean Master (CLM) Program

The Certified Lean Master Program

A multi-session program with a complete package of education and coaching on the creation of lean supply chains.

3 educational sessions of 3 days each with a 4 week break between sessions for participants to apply the knowledge to their own lean initiative.

Participants improve one value stream at their organization, create quantifiable improvements, and begin seeing immediate results.

A certification exam and the opportunity to earn personal recognition as a Certified Lean Master.

Three Sections

A. Crafting a lean initiative and value stream mapping

B. Creating flow and leveraging pull

C. Lean supply chains and the CLM exam

Focus on Results

Creating lean supply chains for manufacturing, retail, distribution, service, and virtual organizations

Developing leadership skills through education, application, and coaching

Certified Lean Masters

Certified Lean Masters are change agentschange agents that deliver results in meeting business objectives and contribute significant improvement to an organization’s bottom line. They stimulate thinking by challenging conventional wisdom and providing options for the successful application of lean concepts across the supply chain from suppliers to customers and beyond.

Certified Lean Master

This program is

ideal for a team

seeking to drive

Improvement.

Who is Responsible?

International Supply Chain Education Alliance (www.iscea.hk)

国际供应链教育联盟 香港及中国区域营运总监

DataDevelop Consulting Ltd. as Authorized Knowledge Provider (AKP)

Contact : Mr. Henry Soo

Email: henrysoo@iscea.hk

Tel: 852.2600.9311, Fax: 852.2600.9316

Q & A Session